(Reuters) - A look at the day ahead in Asian markets. 

Day two of the second Donald Trump administration, and exchange rates are in the global market crosshairs as investors nervously try to figure out how to trade the immediate fog shrouding the U.S. president's trade policy.

That Trump will impose tariffs on imports from many of America's major trading partners seems almost certain. On what products and countries, and to what degree, are unknown right now, leaving the dollar and other currencies vulnerable to choppy and volatile trading.

The same applies to other asset classes too, although the immediate impact is being felt more acutely in FX. Implied volatility across G10 currencies as measured by Deutsche Bank's 'DBCVIX' index remains relatively high, although it did pull back late on Tuesday.

Investors will be relieved that Trump chose not to hit major trading partners with tariffs on his first day in office. They will be hoping his approach to tariffs follows the path SocGen analysts sketched out last week - "talk tough, aim high, but act gradually." 

But the president's off-the-cuff remarks to reporters late on Monday that some tariffs could come on Feb. 1 triggered an immediate reversal in the dollar, and served a timely reminder of how difficult the market terrain will be for investors to navigate in the coming weeks and months.

The dollar looks stretched on positioning, sentiment and valuation metrics - hedge funds last week held the biggest net long dollar position in nine years; 'long dollar' is one of investors' most crowded trades, according to Bank of America's latest fund manager survey; and Citi analysts reckon the currency is overvalued by 3%.

But that doesn't mean it can't go even higher, which is likely if Trump follows through with his more extreme protectionist measures and fiscal policies, Citi analysts warn. Rising Treasury yields and term premiums have tended to be dollar positive in recent years, they note.

Meanwhile, the outlook for markets in Asia on Wednesday is fairly positive following a day of calm on global FX markets, falling Treasury yields and solid gains on Wall Street. Nikkei futures are pointing to a rise of around 0.75% for Japanese stocks at the open in Tokyo.

China's markets will be under scrutiny following their decent start to the week on the back of Trump's initial 'go slow' signals on tariffs. The yuan on Tuesday rose the most since early November, as per the central bank's daily fixing, and on Monday registered its best day in spot market trading since August. 

The main economic events in Asia on Wednesday are the release of New Zealand's latest consumer inflation figures and an interest rate decision and guidance from Malaysia's central bank. 

Here are key developments that could provide more direction to markets on Wednesday:

- New Zealand inflation (December)

- Malaysia interest rate decision

- World Economic Forum in Davos